Propaganda has it that South Africa has enough coal to fire our power plants for 200 years or until alternatives that can compete with coal come onto the market. But we may not have enough coal to last that long.
It all depends on how one estimates the country’s resources and reserves. Work by geologist Chris Hartnady, who recently published his findings in the SA Journal of Science, suggests that coal production will peak by 2020 and that the country’s coal reserves, will, at best, last another 60 to 70 years. This is important because not knowing how much coal is left and how much can be used – in other words, relying on poorly updated coal data – put us in a hole we cannot get out of.
Besides, global demand for the resource is surging to such levels that resources available in China and India that cannot be exploited economically have led to a situation whereby it is cheaper to import coal, especially in parts of these countries where coal is most needed. In both countries, the coal deposits are in the north, while the demand is in the south. It is cheaper to truck coal from the coast – where it is shipped from Indonesia, Australia and South Africa – than to get it from the north.
South Africa is a major source of coal for these two countries, whose voracious appetite for resources could jeopardise our ability to meet our own coal needs and can trip up our false sense of security.
Merely saying that there is coal in the ground does not mean that it is available for use. The oft-quoted two centuries or more of coal supply can be trotted out blithely. On the surface, this may seem an exciting prospect, but, if one looks deeper, one will find that the situation becomes much more complicated.
Resource estimates can vary as a result of the accuracy of the assumptions. There is also a difference between a resource estimate and a reserve – the reserve is the important figure because it is the quantity that is technically and economically feasible to extract.
There are also different types of coal containing varying quantities of carbon and impurities. Coal types vary from low-grade lignite and subbituminous coal to bituminous coal and the really hard and good stuff, like anthracite.
The good stuff, which has a high carbon content and small quantities of impurities, is used as coking coal in smelters. Usually, the best seams of coal that are cheaper to extract are mined out sooner, while the more difficult and deeper deposits only become economical to exploit with improvements in technology and market prices.
But companies or countries that have access to coal resources often overestimate – rather than underestimate – the resources to encourage more subsidies for the sector and continued investor interest in the coal industry.
More importantly, in South Africa, the presumption of large and cheap supply reinforces the coal value chain and the need for more coal-fired power stations. In South Africa, the best coal is exported and is fast running out, and the bad stuff, with a high sulphur content and other impurities, is used for electricity generation.
This lowers the general capacity factors that can be extracted out of coal-fired power stations, not to speak of the extra expense to get rid of all the foul air and volatiles that come with dirty coal. The word ‘cheap’ must be treated with circumspection. South Africa has used most of its good coal. Sure, there are more deposits, but they are of a low quality. The remaining stuff is found in the Waterberg area, close to Botswana, and good rail and road infrastructure is required to haul the coal to markets – the coal is far away from where it is most needed.
Besides, the processing method has to be different to that used for the Mpumalanga coal – a lot more water will be needed to wash this dirty new coal.
Significant investment in infrastructure will be required before we start exploiting the new coal deposits. It is understood that most of these deposits are on much smaller parcels of land, reducing the economies of scale that mining companies enjoyed in older mines. The cost of extraction is expected to go up. International export markets are becoming more lucrative, encouraging expansion of mining.
But this expansion will also have to be sustained by the local use of coal because any further exports will be constrained by inefficiency in rail transport – not all the coal that can be mined can get to the ports in time, despite port capacity at Richards Bay having expanded from 70-million tons to 90-million tons.